What the U.S. Can Learn From Brazil

That was the title of my lecture this morning for the Hillsdale College cruise, while it was sailing south from Rio. But fortuitously I was able to snap the photo below that makes my point: an offshore oil drilling ship—one of three we sailed past early this morning, all operating offshore from Rio. Clearly Brazil isn’t frightened of the risk to its main beach resort and second-largest city, nor will they put up with frivolous lawsuits from the Sierra Club.

One of the clichés of the energy conversation that no one bothers to check is that Brazil “got off oil” or achieved “energy independence” through its aggressive push for ethanol and flex-fuel vehicles. In fact, Brazil made a political decision back in the 1970s that it did not wish to be vulnerable to the price shocks that the various Middle Eastern crises delivered to its economy, as it was much more dependent on foreign oil back then than the U.S. In 1980, Brazil imported 77 percent of its oil. Today, Brazil imports 0.0 percent of its oil needs.

Has it replaced oil with something else? Hardly. As Figure 1 shows, Brazilian oil production has increased 876 percent since 1980, and oil consumption has increased 119 percent. Brazil is now self-sufficient in oil on account of its aggressive exploration and development policies. Brazil has gone from supplying only 23 percent of its oil needs to having a slight production surplus in 2009. With more large offshore discoveries, Brazil is now well positioned to become an oil-exporting nation. Heck, they might even join OPEC, and really stick it to us.

To be sure, while Brazil’s pursuit of ethanol and other measures reduced the total amount of oil it needs, to say that Brazil “got off oil” is completely wrong.